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Condensed monthly operating income data for Korbin Inc. for May follows:
Additional information regarding Korbin's operations follows: One-fourth of each store's direct fixed costs would continue if either store were closed. Korbin allocates common fixed costs to each store on the basis of sales dollars. Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales. The operating results for May are representative of all months. Korbin is considering a promotional campaign at the Suburban Store that would not affect the Urban Store. Increasing annual promotional expense at the Suburban Store by $60,000 in order to increase this store's sales by 10% would result in a monthly increase (decrease) in Korbin's operating income during the year (rounded) ofA. $7,000 B. $(1,400) C. $(5,000) D. $487 |